Public Bill Committee

[Mr. Roger Gale in the Chair]

Clause 15

Abolition of contracting-out for defined contribution pension schemes

Amendment proposed [this day]: No. 37, in clause 15, page 19, line 16, at end add—
‘(10) The Secretary of State must lay before Parliament no later than 31st December 2007 a report setting out how additional revenues from increasing National Insurance Contributions collected from abolishing contracting-out will be used to improve pension provision.’.—[Mr. Laws.]

Question again proposed, That the amendment be made.

Roger Gale: I remind the Committee that with this we are discussing the following:
Clause stand part.
That schedule 4 be the Fourth schedule to the Bill.
 New clause 3—Review of the abolition of contracting-out for defined contribution pensions schemes—
‘(1) The Secretary of State shall make a statement to Parliament in each financial year after 6th April 2010 on the use of the revenue that would previously have been assigned to contracted-out rebates for defined contribution schemes.
(2) For the purposes of subsection (1) above, the statement shall cover the extent to which the revenue is assigned to promoting saving.’.

Andrew Selous: Welcome back, Mr. Gale. As I was saying, new clause 3 would require the Secretary of State to report to Parliament every financial year on how the Government have used the revenue saved by abolishing contracting out and, in particular, how that money has been used to encourage a culture of savings in this country. Amendment No. 37, tabled by the Liberal Democrats, is along much the same lines. I am happy to endorse much of what the hon. Member for Yeovil has said. New clause 3 is essentially a probing amendment. We will listen to what the Minister has to say in response.
Before I conclude, I should just like to reiterate my plea to the Minister for a clear explanation of how the contracting-out rebate figure moved within the space of under a year from £4 billion down to £1.6 billion. Were a company listed on the stock exchange to come out with such a massive variation in financial forecast it could have its shares suspended and the directors would probably be hauled before the stock exchange board to account for themselves. I am sure that all members of the Committee are waiting with bated breath to hear what explanation the Minister can give us on that point.

James Purnell: Thank you, Mr. Gale. It is a pleasure to serve under your chairmanship this afternoon. I hope that I can answer the points raised by the hon. Members for South-West Bedfordshire and for Yeovil to their satisfaction. We have had accusations of mis-selling and of companies being suspended on the basis of these figures. The rather more prosaic truth is that the figures on which we base our assumptions change, so the resulting projections change. I will seek to explain that; if the hon. Gentleman remains unconvinced, I am sure that he will press his amendments ruthlessly.
 The core of the debate is the abolition of contracting out for defined-contribution schemes, which we announced in the White Paper in May. That was one of the key recommendations of the Turner Commission. In principle the view is shared across both Opposition parties—[Interruption.] I am getting a nod of assent from the hon. Member for Yeovil. He said earlier that he did not think that tax relief made any difference to overall pension saving. I think that was the implication of what he was saying. We look forward to his seminar on that subject.

Andrew Selous: I thought we had that this morning.

James Purnell: It is hard to know when one is not in a seminar with him. Life is one long seminar.
We took the approach of abolishing contracting out because we essentially agree with the Pensions Commission that it was making decisions for people too complex. The system was understood by few people, especially in defined-contribution schemes, and overall, rather than helping to support saving for a pension, it may have been discouraging it. Clause 15 and schedule 4 seek to achieve this abolition, and amendments that we have already agreed provide a regulation-making power to remove or vary the rules on protective rights.
There has been interest in the effect of abolishing contracting out on the national insurance rebate, so it is important that we should be able to discuss that now. We have already covered the fact that the abolition of contracting out would mean that more people build up rights in the state second pension, and that takes the form that we were discussing earlier. Therefore, the first answer to the question put by the hon. Member for Yeovil is that it will be broadly financially neutral. People who withdraw from contracting out are building up future rights in the state second pension and therefore those are set at a broadly actuarially neutral basis. That is the point that the hon. Member for Weston-super-Mare was making.
Some of the debate, which has been based on the assumption that there was a huge saving here is incorrect, because any reduction in the cost of the contracted-out rebate is paid for later through increases in S2P obligations. The way that this will operate in practice is that from the date of abolition, contracting out will cease to be available for schemes that contract out on a defined-contribution basis. The members of such schemes will begin to build up state second pension. Contracting out will continue to be allowed for schemes that contract out on a defined-benefit basis. That is the answer that I tried to give the hon. Member for Yeovil on the quinquennial review, but there were two slightly separate points. One was our proposal for twinning the date for the earnings link with that for abolishing contracting out for DC. The other is when the next quinquennial review will happen. That continues to be relevant, even if we abolish defined-contribution contracting out, because that review will set the terms for defined—benefit contracting out. So, that process continues to be relevant and those issues are quite separate.

David Laws: Has the Minister considered the practical issues of having such uncertainty about when contracted-out rebates will end as a result of uncertainty over the earnings link? Is he worried that life will be made a lot less certain than it ought to be for the schemes involved?

James Purnell: I think that we are giving people the appropriate level of certainty by saying that our objective is to do this in 2012. As we previously established, our policy on this is much clearer than the hon. Gentleman’s, or that of the official Opposition. We are legislating to give people a clear timetable, and that applies here as well.
New clause 3 and amendment No. 37 are both concerned with how the putative revenue that would otherwise have been used for the contracted-out rebate is to be allocated in future. I have tried to explain that there are no actual savings there, as the change is, broadly, intended to be actuarially neutral. Without wanting to go into excessive detail, the abolition of the defined-contribution rebate reduces cost in the short term, but there is a broadly equivalent increase in future spending on the state second pension. Thus, changes to the rebate are not a real saving in the sense that it could be used to fund other expenditure.
The hon. Member for South-West Bedfordshire—and, I think, the hon. Member for Yeovil—asked why the figures on contracting out had changed. The reason is that the assumptions on which the projections are made have also changed, as the regulatory impact assessment set out in some detail. Perhaps they have been able to read that as well. The estimates in the White Paper were based on the 2005 pre-Budget report, which used the data available in autumn 2005. To have consistency within the document, all of the figures used within its cost projections were from that same period. 
In publishing the latest White Paper, we have been able to look at how the numbers were changing; in particular, at new evidence of the numbers of people contracting back into the state second pension. A number of major schemes had contracted people back in, which, with the effects of the review that we have put in place, meant a significant downward effect on the number of people who had contracted out. As a consequence, the forecasted cost of the contracted-out rebate, based on real figures, had also fallen significantly. So, there is no great mystery about how that happened. It is a significant change, but one that reflects a big change in people’s behaviour. People are contracting out less; partly because of specific changes and also because there is a growing view that contracting out is too complicated, and people find that a disincentive to save rather than an incentive.

Andrew Selous: I am grateful to the Minister for trying to explain how this came about, but some fairly big question marks are left in my mind. The Minister is saying that between autumn 2005 and the end of 2006, the projections—on what was, after all, a pretty static pension scheme with no massive changes in that time—changed to the extent that the figures altered by £2.4 billion. That is a huge change, so could the Minister say a little more about those changed assumptions? Is he worried that his officials are suddenly going to come to him with other massively changed assumptions within the next six months or so? That could alter the figures even further.

James Purnell: The hon. Gentleman’s premise is that there was a stable pension population, but that is wrong. The figures actually reflect a significant change in the number of people contracting out. Her Majesty’s Revenue and Customs collected data from providers running exercises to contract their members back into S2P, which became available in January 2006. The data showed that about 200,000 people contracted back in every year from 2003-04 to 2006-07, a total of 800,000 people, which will reduce the cost of the rebate in 2010 and 2011 by about £1 billion. There were some significant changes; they were not forecasting changes but actual changes.

David Laws: I am grateful to the Minister for that clarification. Will he put on record the number of people who were contracted out at the first date cited by the hon. Member for South-West Bedfordshire and the total number contracted out on the basis of the new estimate?

James Purnell: I am happy to write to the hon. Gentleman with that information. I hope that I have explained why the figures changed. There is no great mystery to them.
The second thrust of the debate was about what, if there is some money, it will be used for, and the hon. Member for Yeovil advanced four theories. There are two separate matters: first, the cost of pension benefits and pensions, which is set out in the White Paper; and, secondly, tax relief. The two are taken separately in respect of policy and how the figures are explained in the White Paper.
The way we set out our expenditure means that it does not include the contracted- out rebate in terms of the GDP figures that the hon. Member for Yeovil quoted. Nor does it include the increase in tax relief which will come from personal accounts. Personal accounts will drive an increase in the number of people saving through a company or a personal pension. That in itself will lead to an increase in tax relief. The Turner Commission’s recommendation that tax relief should be available to encourage people to save is exactly what our policy will implement.

David Laws: I am grateful to the Minister for his customary patience in giving way to me. He said that the net cost of the policy was zero for the reasons that he set out. Did that estimate include the cost of tax relief on personal accounts? If it did—or even if it did not—does he have an estimate of the cost of that new tax relief?

James Purnell: No and no is the answer to the hon. Gentleman. The change to the contracted-out rebate is actuarially neutral and therefore broadly cost-neutral because there is a direct correlation between people opting back in to the state second pension and there being more state second pension costs in the future. The cost of extra tax relief on personal accounts is not included in the GDP figures that he quoted earlier. It demonstrates my point, that we have to consider affordability within the benefits system. Tax relief policy is set by the Treasury and is accounted for separately from these procedures. If our policy is a success, it will increase the number of people saving in a pension and therefore the overall cost of tax relief.

Nigel Waterson: Can the Minister explain how the first of those sets of figures is affected by the gap between the current basis of the contracted-out rebate and what it would be if the Government had followed the Government Actuary’s recommendations?

James Purnell: I do not have those figures off the top of my head, as they do not relate to our policy. We considered the recommendations and put in place our own policy based on conclusions from the quinquennial review. I am sure that the hon. Gentleman can elucidate on those figures if he wants to. I hope that I have answered his question. There are no savings; that was the economists’ version in the Work and Pensions Committee. There are tax relief implications from the introduction of personal accounts, but they are done separately. There is not a huge pot of money that we should hypothetically be parcelling out among our favourite good causes.

David Laws: Again, I am grateful to the Minister for being both patient and clear, but how does he tally that with the Secretary of State’s statement to the Select Committee on Work and Pensions about the £4 billion or £5 billion that would be freed up by the change? The Secretary of State clearly said that he was making a bid to keep that money within the pension system.

James Purnell: It is clearly consistent with what the Secretary of State said. The money pays down the National Insurance fund, which is in the quote. There should be tax relief for personal accounts, which is what is going to happen. My point was that those two, as an accounting issue, are done separately, one within the benefits system—the figures that we set out in the White Paper. There is then the issue of overall tax relief and its affordability, which is a matter for the Treasury, although of course we work closely together on it. I hope that that answers the Opposition’s general enquiry.
The hon. Member for Yeovil made a specific point about risk sharing, which is worth touching on briefly. People say that there is a transfer of risk from companies to individuals and, indeed, from the state to individuals. To an extent that is true, insofar as we are encouraging extra personal responsibility. We are asking individuals to make provision for themselves, but that statement is worth qualifying. There are a number of ways in which we are trying to help people with those risks. I want to trot through three.
 First, personal accounts will help people to manage risk, because they will be pooled in an organisation that is governed on their behalf and has a genuine critical mass of investment, which would, one would hope, give it greater security. Also, the organisation will be lifestyling the investments for them, managing the security of the investments according to their age profiles. Compared to a situation in which people made the investments entirely by themselves, with their own investments in the stock market subject to fluctuation, then the risk is being managed.
 The second point is that, because of automatic enrolment, there will be more people involved in company pension schemes than there would otherwise be. So, in that sense, that also moderates the general trend.
Thirdly, we are interested in encouraging risk sharing between companies and individuals. There is a growing discussion in the financial services industry and among people who run company pension schemes about whether it is possible to bring back some risk-sharing hybrid schemes. That has been mentioned, as has risk sharing with particular parts of pension provision—for example, life assurance could be provided by the company. We are interested in looking at that because, if it is true that finance directors increasingly want to moderate the risk on the balance sheet, a halfway house between transferring it completely to the individual and keeping it on the balance sheet may be some kind of risk sharing. That is one of the things that our regulatory review is keen to look at.

John Penrose: Will the Minister make it clear that he disagrees with some outside commentators, who seem to make the point that defined-benefit schemes are some sort of gold standard and inherently better than defined-contribution schemes? I think that he is making that point, or it seems to be underlying what he is saying. Certainly based on the information that we received in Select Committee, the differential is mainly based on different levels of contributions; if one puts less into either sort of scheme, one gets less out.
Also, providing the market risk is managed as he described, there is another significant element of risk, which there is not for a defined-contribution scheme. That risk is regulatory change over the course of someone’s working life. The degree of regulatory change and, therefore, the risk of having one’s supposed benefits eroded through law changes, here and elsewhere, are much less in the case of a defined-contribution scheme than in other options.

James Purnell: That is why the Pensions Commission recommended personal accounts, which it wanted people to know was their individual pot. They would have a mixture of provision, with state provision subject to those political risks, but moderated by accounts that were a person’s own property and subject to another type of risk—investment risk. From an individual’s as well as a country’s point of view, sharing those risks is good. The portfolio of risk consists of a mixture of political and stock-market risk, with some people wanting their company to stand behind their pension, too.
However, I am obviously not regulated under the Financial Services Act 1986 to give people financial  advice. They must decide which kind of scheme is most appropriate to them and the risk that they want to take. That is a rather pedantic way of saying that different types of scheme have different risks and advantages, and people need to decide what is right for them.
The hon. Member for Yeovil also asked whether there was a risk of mis-sellng—one of his favourite words—because of the changes to the rebate. I hope that I can reassure him. It is for individuals to decide what sort of pension provision is best in their circumstances; the information that they get at the point of sale, through regulated financial advice, is a key part of their doing so. However, they may want to review annually the advantages and disadvantages of contracting out. The Financial Services Authority will keep a close eye on that. My officials are working closely with the FSA on the consumer information on contracting out that it provides.

David Laws: Is that really good enough? The Minister says that this is a matter for individuals and their advisers in the context of the Government’s rejection of advice from the Government Actuary’s Department about the level of rebate that is appropriate in order for people to be sensibly contracted out. Surely there is a mis-selling risk, because the Government are ignoring that advice.

James Purnell: As I say, it is for individuals to make those decisions. The hon. Gentleman sometimes talks as though it will be the Government making the decisions rather than the individual. The individual takes out a pension—regulated by the FSA—and it is the individual’s decision. In practice, some providers have chosen to contract their members back into S2P. It is because of the difficulty of making those decisions that we think that contracted-out DC schemes, with the extra complexity that they introduce, should be abolished.
I hope that I have answered the points that hon. Members have made—

David Laws: Will the Minister give way one last time?

James Purnell: Obviously not.

David Laws: This really is my last intervention, and I know that the Minister will want to have a chance to respond directly to it rather than just listening to my short summing-up speech. Is it the Government’s policy on personal accounts on the one hand and other employer schemes, including DB schemes, on the other to achieve neutrality—the Government are not seeking to incentivise employers to take up one scheme rather than the other—or do the Government intend to tilt the playing field either towards encouraging employers to make their own provision, as in the past, or towards personal accounts?

James Purnell: I think that the tax relief on each will be broadly equivalent. However, we do want to encourage employers to continue to provide company pension schemes, or to start to do so. The range of measures set out in the December White Paper is designed to do exactly that. We are not proposing extra tax relief above and beyond that which already exists to do that, but, like all parties, we want to encourage people to provide company pension schemes. As I told the hon. Member for Weston-super-Mare, we are not making a value judgment between the two.
The aim of all the provisions in the schedule and the clause is to ensure a smooth and ordered end to contracted-out DC schemes. That will bring to an end an element of pension regulation that has been an increasing source of complexity for both providers and individuals, and I urge hon. Members not to press amendment No. 37 and new clause 3.

Andrew Selous: I am grateful to the Minister. Our debate has shown the benefit of repeated interventions in drawing out further information from him. If I have missed the assumptions in the Government’s latest regulatory impact assessment of which the Minister spoke, I apologise. I tried to look at it as carefully as possible.

James Purnell: I am sorry; it is the RIA to the White Paper.

Andrew Selous: I am grateful for the Minister’s correction. He has rather more officials working on his behalf than the hon. Members for Eastbourne and for Yeovil and I have researchers, but I am none the less grateful. The debate has been useful in explaining the huge change in the figures.

David Laws: I am grateful to the Minister for his reply and for accepting my interventions. I promise the Committee that I shall try to put my contributions on a fast track for the rest of the afternoon.
The debate has been useful and the Minister’s answers have been candid and direct. I shall sum up where we are and where there are still problems. He said that there is a clear timetable for getting rid of the contracted-out rebate. His idea of a clear timetable is slightly different from mine, because his allows for the opted-out rebates to be abolished in any of four years. He gave us an insight into the decline—pretty much the collapse—of defined-contribution schemes in a short period. He has kindly said that he will put in writing the number of people who were in DC schemes and what that number has come down to.

James Purnell: It is important to say that it is not the defined-contribution schemes that have collapsed but those that are contracted out. People are still contributing to their pensions, but they are in the state second pension system rather than contracted out.

David Laws: I am grateful for that clarification. It has perhaps been a collapse in the attractiveness of remaining contracted out. In that regard, I remain concerned about the Government’s determination to ignore the potential mis-selling of the level of contracted-out rebates. We all know that that is uncertain by the nature of DC schemes, but the Government should not say that it is simply an issue for advisers and individuals. The Pensions Commission has shown that the Government chose to ignore the advice of the Government Actuary’s Department, and it set out the implication of that in black and white terms in its final report: that
 “unless individuals aged over 44 in APPs and 48 in money purchase schemes receive higher investment returns than assumed by GAD, the contracting-out rebate will not replace foregone S2P benefits.”
The Government chose to ignore the GAD’s advice and to allow people who decide not to go back into the S2P to risk losing out, which creates a dangerous position. The Government ought to consider whether to give further advice to people in that position to ensure that there is no possibility of our being back here in 10 years with a case of serious mis-selling. People would have a strong case to argue.
The Minister mentioned the missing £5 billion, or £4 billion—it is now down to £2 billion—and plumped for what I describe as the economist’s case: that it is a zero-sum game because the rebates will offset the extra S2P obligations. In fact, he went a bit further and said that the Government have coughed up tax relief on personal accounts, although he did not give us a figure. It would be useful to get one on the record. Also, the contracted-out rebates are not compensating properly for the state second pension, so if there is any value in what the Government are doing it might be that they are taking on board an additional cost, which is set against a saving. The Minister has been clear about that, but it seems at least moderately to contrast with the Secretary of State’s acceptance of the fact that there was a pot of £4 billion or £5 billion that he was desperate to get his hands on. Other people who have also been desperate to get their hands on it will be disappointed to know that they are not allowed to and that the amount has shrivelled so much.
The issue of Government incentives in relation to personal accounts and company schemes, including DB schemes, will be dealt with to a greater extent when the personal accounts come in. However, there is widespread, legitimate concern that there could be a levelling-down process that will accelerate the decline in the contributions made by many companies. The Government need to give some thought to the extent of the regulatory changes that they could introduce to make it easier for DB and other good employer schemes to remain in existence. The Minister indicated that the Government have an open mind on that issue and are willing to examine changes that could facilitate more affordable schemes.
 There is also an issue about whether the Government will take a completely neutral attitude on whether employers will opt for personal accounts or for DB or other schemes. I hope that the Government would be, at the very least, neutral on that matter, and that, if anything, they would acknowledge that those employers who choose the non-personal account schemes will be taking on very large costs and burdens. Furthermore, the Government should consider what they can do, through legislation and other means, to ensure that those schemes do not disappear in the years ahead.
Having aired those concerns reasonably extensively, I will not press amendment No. 37 to a Division. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 15, as amended, ordered to stand part of the Bill.

Schedule 4

Abolition of contracting-out for defined contribution pension schemes

Amendment made: No. 59, in schedule 4, page 43, line 11, leave out
‘(identification and valuation of protected rights)’
and insert
‘(persons who may establish scheme)’.—[James Purnell.]

Schedule 4, as amended, agreed to.

Clause 16

Dispute resolution arrangements

Nigel Waterson: I beg to move amendment No. 89, in clause 16, page 19, line 36, at end insert—
‘(4B) Upon becoming aware of a matter of dispute, the specified person, or trustees or managers if appropriate, should acknowledge receipt and advise the person or persons with an interest in the scheme, in writing, of the existence of the Pensions Advisory Service and the assistance it can provide in relation to the dispute resolution.’.
Before dealing with the meat of the amendment, perhaps I may make a general point. Although the basic provisions in clause 16 for dispute resolution arrangements make for fascinating reading, as far as I can determine they are pretty uncontroversial. Outside bodies seem perfectly happy with them, so who am I to say any different?
 The only amendment that we have tabled is at the behest of the Pensions Advisory Service, which erupted on to the scene at the end of last week with this wording. The Minister may be able to tell me something different, but it seems to me that PAS is making an eminently sensible, workmanlike and practicable suggestion. For those members of the Committee who are not aware of PAS, it is an independent organisation, but it is funded by grant in aid from the Department for Work and Pensions. Speaking as a constituency MP, I believe that it does excellent work in trying to resolve a lot of complaints, problems and concerns that individuals have about pensions issues. Indeed, in its briefing note PAS says:
“In the period April 2005 to March 2006...88% of the complaints”—
that is 88% of the complaints referred to them—“were resolved” and no further action was required by any other body. That is extremely impressive; it presumably makes matters much less stressful for the individuals involved, and presumably also saves a great deal of money.
According to PAS, the proposed amendment would allow pension schemes to adopt a one-stage IDRP—for the uninitiated, that is an internal dispute resolution procedure—and if schemes take that route, members may not become aware of the existence of PAS until after the completion of the IDRP. PAS says:
“It is our experience that the resolution of disputes is more effectively done before completion of the IDRP, and often before the procedure has been invoked. We are therefore concerned that the unintended consequence of the amendment as it currently reads would be an increase in unresolved disputes which in turn would increase the level of submissions to the relevant ombudsman services.”
It goes on to discuss its independence and its standing within the industry, in terms of its contribution to dispute resolution.
PAS goes on to say that the management of complaints
“would be made more efficient if a requirement were introduced that all written complaints had to be acknowledged.”
That sounds axiomatic, but perhaps it is not. The PAS also said:
“We would suggest the earlier involvement of TPAS in situations of disputes would have the effect of reducing the number of cases which require the formal deliberations of the IDRP and reduce the number of applications to the Pensions Ombudsman.”
That seemed perfectly sensible, so I tabled the amendment with alacrity. On every Bill Committee that I have ever served on, one Opposition amendment has always been accepted and this amendment, like the golden rivet in a ship, might be it.

David Laws: I promised brevity on the previous clause and that is what I shall deliver now. We also support the amendment, but the hon. Gentleman got in there first—he obviously reads his e-mails more rapidly than I do. He put the case extremely well. We support the amendment, and hope that he is right that the Under-Secretary will accept it and that it will be one of those home runs that we have on every Bill.

James Plaskitt: I thank the hon. Member for Eastbourne for the amendment and for speaking with such alacrity in support of it.
Before I deal with the amendment it might help to say a few words about the purpose of the clause. The clause amends the provisions relating to the resolution of disputes. Occupational pension schemes are currently required to operate a formal two-stage process for dealing with disputes between individuals and trustees. However, the process is rather prescriptive and is bound by rigid time limits. Although the process works well in many larger schemes, we wanted to give schemes the opportunity to adopt something simpler and more flexible. The change that we propose also follows recommendations that came from the Pickering report.
We legislated in the Pensions Act 2004 to enable schemes to simplify their dispute resolution arrangements, by allowing them to adopt either a one or a two stage-procedure. However, the measure was not commenced, because doubts were raised by pension schemes and their advisers about the extent to which the provisions would allow trustees to delegate decisions on disputes. It is common practice for trustee boards to delegate such decisions, often to a dedicated sub-committee, and that is perfectly reasonable and sensible. We therefore decided that it would be sensible to put the matter beyond doubt at the earliest opportunity. That is the main purpose of the clause. The clause makes it clear that a decision on a dispute does not need to be made by the full trustee board. The decision must, however, be made by one or more of the trustees and cannot be delegated outside the trustee body. That is a small but sensible provision that will enable schemes to adopt simpler and cheaper dispute resolution arrangements, if they prefer to do so.
I agree that the Pensions Advisory Service does valuable work. I also know that the assistance and support that it provides is greatly appreciated. The hon. Gentleman is quite right to refer to the 88 per cent. success rate in resolutions and the 68,000 referrals that were made to the service last year. Under the current two-stage arrangements, the scheme member will be told about the Pensions Advisory Service with the decision on the first stage. The member will then have the opportunity to talk to the service before the matter is reconsidered by the trustees.
The current requirement is based in secondary legislation. It is neither necessary nor appropriate to deal with the issue in such detail in the Bill. As I have said, the main purpose of the changes set out in the clause is to make things simpler and easier for schemes to implement, and to make the legislation less prescriptive. Requiring every scheme to acknowledge every application in writing, as the amendment proposes, might be counter to that aim. It may be that a dispute arising from a misunderstanding or miscommunication can be resolved quickly and easily and that an acknowledgment would serve no useful purpose. I am also conscious that in December we published a simplification plan in which we committed to reducing the burden proposed by existing regulations as well as to minimising burdens flowing from any new regulations. In considering any new regulatory requirement, we have to measure it against the aims and targets set out in the Department’s simplification plan and consider it in the light of our current deregulatory review.
We will consider the issue carefully; I assure the Committee that we will give serious thought to how best to ensure that people are made aware of the services offered by the Pensions Advisory Service without imposing an unnecessary regulatory or administrative burden on schemes. I should add that if the clause comes into law, the secondary legislation will need to be amended. We shall consult at that point, which would be the more appropriate time to consider any basis of referral to the Pensions Advisory Service.
With those assurances, I have to tell the hon. Gentleman that this amendment is not his golden rivet. I ask him to withdraw it.

Nigel Waterson: Perhaps I shall get lucky later. I am grateful to the Minister for that patient—indeed, painstaking—explanation of the provisions. I was not wholly wedded to putting the issue into the Bill, although I had a hankering to point out to my grandchildren that I had been the architect of section 16(4)(b) of the Pensions Act 2007. However, I am afraid that that is not to be. The Minister has assured us that the issue will be considered and consulted on in secondary legislation, and I am more than happy that that should be the case. I am delighted that the Minister is also impressed by the effectiveness and efficiency of the Pensions Advisory Service. I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 16 ordered to stand part of the Bill.

Clause 17

Removal of Secretary of State’s role in approving actuarial guidance

Question proposed, That the clause stand part of the Bill.

Nigel Waterson: I shall not detain the Committee long, Mr. Gale. Somebody once said of President Calvin Coolidge that he looked at someone as if they had been a side dish that he had not ordered. That thought went through my mind as I saw your face, Mr. Gale, so I shall try to keep my contribution short.
Clause 17 and schedule 5 are designed to remove the requirement that the Secretary of State should approve actuarial guidance in certain cases. The current arrangement, set out neatly on page 82 of the regulatory impact assessment, is that when calculating pensions liabilities all actuaries are supposed to use agreed guidelines, to ensure consistency. For reasons beyond my comprehension, those are called either “guidance notes” or a “technical memorandum”.
 Various bits of primary legislation require the Secretary of State to approve three of those guidance notes—although there are seven altogether; I do not know who approves the other four—and the one technical memorandum. I understand that the Institute of Actuaries in England and Wales and the Faculty of Actuaries in Scotland, which combine the roles of regulator and professional body, have always prepared those documents. Owing to their dual role and what might have been described or perceived as a conflict of interest, they were required to obtain the Secretary of State’s approval. That was said to be to maintain the public’s confidence, although I cannot imagine for the life of me that many members of the public are even aware that the things exist, let alone who prepares them.
In its 2005 report, the Morris review concluded that the Financial Reporting Council should establish a new regime to set actuarial standards and oversee the regulation of the profession. The Government have accepted the recommendation, and in turn the FRC has set up the Board for Actuarial Standards—oh to be a fly on the wall at its meetings! That is no doubt a relief to the Faculty of Actuaries and the Institute of Actuaries, which continue to have an important role as the professional bodies for their profession.
I understand that on 6 April this year the board will take over responsibility for the guidance notes and technical memorandums. At that stage, the FRC and the BAS become the UK’s independent regulator for corporate reporting and governance, and there is no longer a need for the Secretary of State to have a role. I am sure that that will come as a great relief to him, as he already has quite enough on his plate—the pensions crisis, the failure to tackle reform, the failing Child Support Agency. I could go on.
 In a nutshell, the proposal seems to be uncontroversial and therefore we support it. Indeed, I am emboldened in that view by a Library note which tells me that the equivalent provisions in the Companies (Audit, Investigations and Community Enterprise) Act 2004 did not even merit discussion during its Committee stage.

James Plaskitt: I shall now demonstrate that I share in the hon. Gentleman’s enthusiasm for the clause. I begin by cautioning him about praying in aid the late President Calvin Coolidge. He should remember that when that President died—in 1923, I believe—his death was reported to a dinner party, and the response was, “How could they tell?”

Nigel Waterson: Dorothy Parker said that.

James Plaskitt: Indeed, yes.
 As the hon. Gentleman said, clause 17 and schedule 5 remove the Secretary of State’s role in approving actuarial guidance. This arises from one of the recommendations of the Morris review of the actuarial profession. Clause 17 introduces schedule 5, which amends nine references in legislation. It removes the requirement for the Secretary of State to approve prescribed actuarial guidance notes and, in other cases, it removes the power to make regulations to prescribe that the Secretary of State approve such guidance. The references can be found in the Bankruptcy (Scotland) Act 1985, the Insolvency Act 1986, the Pension Schemes Act 1993, the Pensions Act 1995 and the Pensions Act 2004.
Actuarial guidance is currently produced by the Institute of Actuaries in England and the Faculty of Actuaries in Scotland. It ensures that all actuaries calculate pension liabilities on a consistent basis. The Faculty and Institute of Actuaries is also the professional body for actuaries. In order to ensure that there is no conflict of interest between those roles, legislation requires certain actuarial guidance to be approved by the Secretary of State. However, following the Morris review, the actuarial profession is now subject to independent oversight by the Financial Reporting Council, which is the independent regulator for corporate reporting and governance.
The FRC will establish the Board for Actuarial Standards to set technical standards for actuaries and to oversee the prescribed actuarial guidance. The Faculty and Institute of Actuaries remains the professional body for actuaries. It is therefore no longer necessary or appropriate for the Secretary of State to approve actuarial guidance. I commend clause 17 and schedule 5 to the Committee.

Question put and agreed to.

Clause 17 ordered to stand part of the Bill.

Schedule 5 agreed to.

Clause 18

Personal accounts delivery authority

Nigel Waterson: I beg to move amendment No. 81, in clause 18, page 20, line 31, leave out subsection (2).

Roger Gale: With this it will be convenient to discuss the following:
Clause stand part.
Amendment No. 8, in schedule 6, page 55, line 1, after ‘a’, insert ‘lay’.
Amendment No. 41, in schedule 6, page 55, line 1, leave out ‘chairman’ and insert
‘lay chair who is not perceived to have a conflict of interest with regard to the financial services industry, but is there to represent the views and look after the interests of scheme members and prospective scheme members,’.
Amendment No. 9, in schedule 6, page 55, line 2, after ‘members’, insert
‘(of which two shall be appointed to represent the interests of consumers)’.
Amendment No. 42, in schedule 6, page 55, line 2, after ‘ members’, insert
‘, of which at least two out of nine members will be non-executive consumer directors who represent scheme members and prospective scheme members and are recognised professionally by consumer groups,’.
Amendment No. 10, in schedule 6, page 55, line 3, leave out ‘or (3)’ and insert ‘, (3) or (3A)’.
Amendment No. 11, in schedule 6, page 55, line 8, at end insert—
‘(3A) Before appointing, or approving the appointment of, any member representing the interests of consumers for the purposes of sub-paragraph (1)(b), the Secretary of State must consult such organisations as appear to him to represent the interests of consumers.’.
Amendment No. 44, in schedule 6, page 55, line 8, at end insert—
‘(3A) Any consumer appointments for the purposes of sub-sub-paragraph (1)(b) must be discussed with consumer groups prior to appointment and the said consumer groups will have the right to comment on the said appointments.’.
Amendment No. 12, in schedule 6, page 55, line 11, at end insert—
‘1A Before appointing any member of the Authority under sub-paragraph 1(1) the Secretary of State must—
(a) conduct and open recruitment competition inviting applications from individuals with extensive knowledge, experience and expertise in the fields of pensions or financial marketing or both;
(b) consult organisations which appear to him to represent key groups of stakeholders;
(c) have regard to the desirability of appointing a group of members whose expertise collectively spans all aspects of occupational and personal pension provision and financial marketing.’.
Amendment No. 13, in schedule 6, page 55, line 11, at end insert—
‘1A In appointing members the Secretary of State shall have regard to the desirability of recruiting a group of members so that there is a balance as the Secretary of State considers appropriate between—
(a) members with knowledge and experience of consumers’ pension needs;
(b) members with knowledge and experience of employers’ involvement in pensions;
(c) members with knowledge and experience of pensions from the pension providers;
(d) members with knowledge and experience of pensions from the relevant regulators.’.
Amendment No. 15, in schedule 6, page 55, line 30, leave out ‘or other’.
Amendment No. 82, in schedule 6, page 56, line 26, leave out sub-paragraph (2).
Amendment No. 45, in schedule 6, page 59, line 7, at end insert—
‘(2) The Authority shall establish a committee for the purpose of representing scheme member and prospective scheme member interests, which shall be chaired by a consumer representative.’.
Amendment No. 14, in schedule 6, page 59, line 20, at end insert—
‘10A (1) The Authority must establish a committee for the purpose of representing the interests of scheme members and prospective scheme members.
(2) The chairman of the committee must be a consumer representative appointed under paragraphs 1(1)(b) and 1(3A).’.
That schedule 6 be the Sixth schedule to the Bill.
 New clause 5—Application of Freedom of Information Act to Personal Accounts Delivery Authority—
‘(1) The Freedom of Information Act 2000 (c. 36) is amended as follows.
(2) In section 35 (formulation of government policy etc.) insert after subsection (2)—
“(2A) Information held by or provided by the Personal Accounts Delivery Authority is not to be regarded—
(a) for the purposes of subsection (1)(a), as relating to the formulation or development of government policy, or
(b) for the purposes of subsection (1)(b), as relating to Ministerial communications.”
(3) In section 36 (prejudice to effective conduct of public affairs) insert after subsection (2)—
“(2A) Information held by or provided by the Personal Accounts Delivery Authority is not be to regarded—
(a) for the purposes of subsection (2)(a), as relating to the maintenance of the convention of the collective responsibility of Ministers of the Crown, or
(b) for the purposes of subsection (2)(b), as relating to the free and frank provision of advice, or the free and frank exchange of views for the purposes of deliberation; or
(c) for the purposes of subsection (2)(c), as relating to the effective conduct of public affairs.”.’.

Nigel Waterson: I feel quite weak, Mr. Gale, faced with such a large group of amendments and new clauses, but I shall try to rise to the occasion. Unfortunately, I cannot promise to be brief on this group, particularly as it includes clause stand part.
We have now moved on to the next important part of the Bill. It deals with the system for personal accounts. It is worth setting out a few parameters for the debate before I go through the various amendments and new clauses, particularly as it includes clause stand part.
I was interested, as all members of the Committee were, to receive the Minister’s letter of yesterday, which I thought had a hint of nervousness about it, and I shall explain why. Our suspicion has always been that the reaction of Ministers to this set of amendments would be that they were all matters for the next Bill, which will come up next year.

James Purnell: They are.

Nigel Waterson: The Minister says, right on cue, that they are. Well, we beg to disagree. Of course, there are areas of detail about personal accounts that it is inappropriate to go into here, Mr. Gale, as I am sure that you would be the first to remind us. However, we fear that there is a temptation into which Ministers are in danger of falling, and it is our job to help them not to fall into it. The temptation is to pass the legislation with a sigh of relief, then to pass the whole job over to some hot shots running the delivery authority and leave it to them to make all the difficult, tricky decisions. I would be the first to say that politicians are the last people we want running something like that in any detailed way. However, I think that it behoves us, particularly in view of the timeline involved with the reports, to nail down some clear ideas about the personal accounts system before we wave goodbye to the legislation.
As I said, I thought that the letter of 31 January betrayed a certain nervousness on the part of the Minister. In the second paragraph, it says that
“delivering and managing a major occupational pension scheme such as personal accounts... should not be a task for government.”
The answer to that, as I have tried to indicate, is yes and no. Of course, they are right, as the Minister goes on to say:
“We therefore propose to bring in experts to help develop and deliver the personal accounts scheme.”
He goes on to talk about the second pensions Bill later this year, and to stress the advisory nature of the delivery authority. That is all well and good, but to take one clear example before I move onto the weight of the amendments, he talks about
“advising on the design of the commercial strategy”.
As I have made clear in more than one speech, the Opposition hope that personal accounts will be a success, not only because they are the right approach to take to such a massive change in our systems, but because we may be the ones to inherit their implementation. We think that personal accounts have got to have the right shape, in a very general sense. I do not want the Minister to get too worried; we do not want to be too prescriptive, but we need to feel that the system is going to work. If it fails, and the accounts are not sufficiently attractive to the target audience—we shall come later to issues about whether the target group has changed—we want to do what we can to try to put that right now.

James Purnell: I want to correct any impression that we were nervous; it is more that we were confused by the number of amendments, given that we think that they pertain to the White Paper consultation and the next potential Bill. I refer the hon. Gentleman to clause 19(2), which makes it clear that this is all about advice on
“proposals by the Secretary of State”.
There will not be an organisation taking decisions; there will be an organisation advising the Secretary of State. That is the hon. Gentleman’s grab handle if he is worried about our falling off the cliff and giving it all to another body to make the decisions. They will be decisions by the Secretary of State, not by the authority.

Nigel Waterson: I take the Minister’s point, but I would say two things. First, the body itself will probably benefit from some sort of steer from the Committee as to what shape personal accounts might have. Secondly, contrary to what some members of the Committee may believe, I do not wake up in the morning and dream up all the amendments and the concerns that we wish to express. I do occasionally, but on the shape of personal accounts, an awful lot of the amendments, if not most of them, are driven by the industry—the very people who will have to make them work. Therefore, when I am speaking, it might not really be me at all; it might be the very people whom the Minster wants to enlist to make personal accounts a success.
I now turn to annexe A—rather bizarrely, there is no annexe B—to the Minister’s letter, in which he says:
“The Delivery Authority will be led by a Chair and Chief Executive with the right skills and expertise...supported by appropriate legal, commercial operational, business and financial expertise.”
That is the kind of issue that we want to explore in more detail. Crucially, he moves on to marketing and communications. We think that marketing is a crucial part of selling personal accounts; people will have to want to buy them. I will also talk about that in more detail.
The annexe to the Minister’s letter then refers to the role of the personal accounts board, which
“will be responsible for the management, rather than the delivery, of the personal accounts scheme.”
That is an important distinction. We are concerned that the delivery authority should be set up. Although in law the authority and the board are separate entities, we are worried that the Government want to see one morph into the other. Each requires a wholly different skills set for the introduction and delivery of the concept. The Minister recognises that by saying:
“There is a clear distinction between the work of the Delivery Authority and the personal accounts board.”
We want to underline that in these debates.
 I shall assist the Committee by pointing out that clause 18, along with schedule 6, is about pay and rations, as it were, or the nuts and bolts. Clause 19 is about the wider issues—the purpose and scope of personal accounts, the authority’s relationship with its successor body and the definition of success or failure. There I fear that we may bump up against the limits of consensus, but we will see where the discussion takes us.
I shall move rapidly on to the large group of amendments, beginning with amendment No. 81, which is a probing amendment that will allow me to raise a couple of concerns. Subsection (2) makes it clear that:
“The Authority is not to be regarded as the servant or agent of the Crown”
and therefore does not enjoy Crown immunity or any claims. That raises an important issue, which arises in the context of the European Court proceedings that have just been concluded against the Government and the High Court proceedings that have been brought by pensioners’ groups, which are due to be heard on 7 February.
Whoever the Government are and however the architecture ends up, there should be distance between the Government and issues such as investment policy. I do not think that the Government should be in the business dealing with that sort of thing; they should be in the business of minimising as far as possible the political risk. I should therefore like to probe the Minister as to what the Government have in mind on the question of Crown privilege. It is right that Crown privilege should not apply, but does the Minister envisage claims against the authority? If so, what sort of claims does he envisage?
Let me move on. A cluster of amendments have been fomented, encouraged and supplied by Which?, formerly the Consumers Association, and have its seal of good housekeeping. The hon. Member for Yeovil occupies an interesting parallel dimension, because in most if not all cases, his amendments are identical to mine. I take it as praise indeed.
The first set of amendments includes amendment No. 8, which is ours, and amendment No. 41, which is the hon. Gentleman’s. Amendment No. 8 would put “lay” in schedule 6. Its purpose is to ensure that all chairs do not have any perceived conflict of interest with regard to the financial services industry, and that they look after the interests and represent the views of scheme members and of prospective scheme members. It is a probing amendment. “Lay” is a difficult word, and some definitions in other legislation are not directly comparable. However, it is important that the Minister understands our drift. The theme of many of the twinned amendments is to ensure that the interests of consumers and of potential consumers are at the heart of the way in which the authority undertakes its business.
Likewise, amendments Nos. 9 and 42 are again Conservative and Liberal Democrat. The Bill does not state that there should be mandatory consumer representation on the delivery authority. Which? is keen to ensure that there is a focus on the best deal for scheme members and for prospective scheme members. The amendments call for two mandatory non-executive consumer directors who would be recognised in a professional capacity by those stakeholder consumer groups that have an active interest in the subject. Which? has been energetic in attending many of those marvellous seminars, discussing with us—and, I am sure, other parties—its concerns as time has gone on. Emma Higginson, in particular, has been extremely helpful in briefing on the concerns that it and its members have.

Which? takes the view, and I am sure that there is a lot in what it says, that
“consumer representation is fundamental if trust and confidence in personal accounts is to be upheld.”
It has carried out its own research. Which? has consistently demonstrated that consumers trust an independent board to administer their pensions. They want directors who will provide expertise and knowledge of consumer issues, who will represent the diverse needs and aspirations of consumers, and who will ensure that mis-selling scandals are avoided.
Amendment No. 11, and amendment No. 44 tabled by the hon. Member for Yeovil, would require the Secretary of State to consult such organisations as appear to him to represent the interests of consumers before appointing or approving the appointment of any member representing the interests of consumers. It is important that the Secretary of State’s definition of a consumer representative is the same as that of recognised consumer groups, and it makes sense to ensure that there is proper consultation with those groups. My amendment does not specify those groups; that might be a matter for secondary legislation. I am sure that the list is obvious, but it is a point worth making in Committee.
Amendments Nos. 14 and 45 say that the authority must establish a committee. There is provision for setting up any number of committees under the delivery authority, but there should be a committee for the purpose of representing the interests of scheme members and of prospective scheme members. Again, a consumer committee could serve as a sounding board for personal accounts issues, and for policy decisions in particular, given the impact that they will have on the consumer. A committee would provide extra scrutiny and advice to ensure the direct involvement of key representatives and stakeholders, and, I hope, to improve the quality of decision making. Amendment No. 10 is a consequential amendment.
Amendment No. 12 is, I hope, reasonably clear in its intention. It specifies that before appointing any member of the authority the Secretary of State must conduct an open recruitment competition inviting applications from individuals with the relevant qualifications, consult organisations representing key groups of stakeholders and
“have regard to the desirability of appointing a group of members whose expertise collectively spans all aspects of occupational and personal pension provision and financial marketing.”
 Those last three words are important for reasons that I have already mentioned. Whoever takes on this job must have a marketing background or at least have people around them who do. Ultimately personal accounts may stand or fall on the success of the marketing campaign and therefore that is a particularly important provision in this Bill. The National Association of Pension Funds has indicated its support for amendment No. 12. It says that it wants to see members with the relevant experience and knowledge, particularly of occupational pensions. We agree with that.
We want to tease out from the Minister the kind of people he has in mind. What kind of people will or are being recruited? I hope that he can share with us the extent to which the Government are already seeking recruits for these positions. There is always this slightly delicate issue of what a Government can do before a piece of legislation receives Royal Assent. I seem to remember that on the 2004 Act there was a bit of an up and downer about hiring the head of the Pension Protection Fund before the Bill had gone through all its stages. I do not want to get too formal about it, but it behoves the Minister to tell us what is happening. Has the Secretary of State appointed a firm of headhunters to beat the bushes in the financial services and other sectors? If so, what criteria are being given to the headhunters in that search? It is only fair that the Committee be put in the picture.
Amendment No. 13 states:
“The Secretary of State shall have regard to the desirability of recruiting a group of members so that there is a balance as the Secretary of State considers appropriate between—(a) members with knowledge and experience of consumers’ pension needs; (b) members with knowledge and experience of employers’ involvement in pensions; (c) members with knowledge and experience of pensions from the pension providers; (d) members with knowledge and experience of pensions from the relevant regulators.”
I would hope, again on the basis of this probing amendment, that the Minister will feel able to say that these are all criteria that he is already operating. That would be very reassuring. I can almost hear his argument coming that these are not matters that should be on the face of the Bill. But in the light of reasonable assurances from the Minister, I am sure that we can come to some accommodation on that.
Amendment No. 15 is to schedule 6. It relates to paragraph 2(6) about conflicts of interest, which reads:
“In this paragraph and paragraph 3 ‘conflict of interest’, in relation to a person, means a financial or other interest which is likely to affect prejudicially the discharge by him of his functions as a member of the Authority.”
It would obviously be wrong if someone with a clear financial interest was involved because there would be a conflict of interest. But what wealth of potential problems is contained in the otherwise innocent words “or other”? What kind of situation or conflict do the Government have in mind? Would the Minister mind sharing that with us?
On amendment No. 82—

David Laws: Does the hon. Gentleman agree that amendment No. 82 removes a paragraph that allows the Secretary of State to pay pensions, allowances or gratuities to the chairman and the non-executive members of the authority at his discretion?

Nigel Waterson: That is a helpful intervention for which I am most grateful, and the hon. Gentleman is right. This is a probing amendment, because I am a bit puzzled as to why the delivery authority, which will have a short existence, should be in the business of paying pensions, allowances or gratuities—I do not know what that would mean. Would the members be given a couple of quid in their hands for turning up to a meeting? Paragraph 4(1) reasonably makes it clear that they should get remuneration and allowances. That is perfectly proper and is to be expected. However, I am not entirely convinced about where pensions, allowances and gratuities would come in.
 Amendment No. 14 exactly parallels amendment No. 45 from the Liberal Democrats. That, I understand; it is about representing the interests of scheme members in a committee.
 I think that the last issue that I need to deal with in this group is new clause 5, which concerns freedom of information. The Personal Accounts Delivery Authority will be subject to the Freedom of Information Act 2000, but the Act exempts information relating to the formulation of Government policy and the free and frank provision of advice. Those provisions are intended to protect the confidentiality of advice given by officials to Ministers and internal discussions within Government. However, we would want to underline the fact that the delivery authority will be independent from Government, not part of it, and I am sure that the Minister will be eager to say that, too. We are supported by the Association of British Insurers, among others, in thinking that it is important to make it clear that the advice tendered by the delivery authority about the best way to run personal accounts should be freely available to the public and the industry, so that everybody can judge the value of its recommendations and assess any final decisions taken by the Secretary of State on the basis of that advice.
Although I am always open to criticisms of my drafting, I think that the new clause achieves that purpose. It is designed to ensure that members of the public and others are able to make applications under the 2000 Act in respect of the delivery authority, and that there will not be any bar to that on the basis set out in the clause.
I hope that I have dealt adequately with the new clause and all the amendments, even those that were not tabled by my party, and I hope that there is something in there that the Minister might accept.

Roger Gale: I have no desire to curtail the right of any hon. Member to make whatever in-order comment he or she wishes. However, it has not escaped my notice that the provenance of some of the amendments seems to be remarkably similar. It is therefore likely that the arguments might be remarkably similar, so in order to expedite matters I should be grateful if hon. Members would eschew repetition.

David Laws: I am grateful not only for that advice, Mr. Gale, but for the fact that you did not look me directly in the eye when giving it. It is clearly designed for all members of the Committee. I did not, as you know, speak to clause 17 because the passport for that seemed to be having a joke about Calvin Coolidge. As I did not have one, I felt it was not appropriate for me to contribute. However, I agree that these amendments look rather similar. We are discussing a shadow delivery authority and have eight amendments shadowing each other—probably, I fear, in the wrong direction from my perspective, but arguably so closely that we will not split hairs.
Amendment No. 8, as you rightly say, Mr. Gale, shadows amendment No. 41, amendment No. 9 shadows amendment No. 42, amendment no. 11 shadows amendment no. 44 and amendment No. 14 shadows amendment No. 45. They all come from Which? so the hon. Member for Eastbourne and I will be happy for it to have the full credit for them. It is quite right to say that I have, essentially, been able to contract out the selling of these fine amendments to the hon. Gentleman, who has done a magnificent job in setting them out.
All I really need add, then, is that these amendments clearly demonstrate the importance of this body having consumer interests at its heart and not just being a sort of industry-Government fix. I need add nothing else.

James Purnell: Now there is a practice that we should continue in future, Mr. Gale; but I do not want to give you advice, as I am surely not allowed to do so. I am tempted to agree with the spirit behind all these amendments, and leave it at that. We do, however, have a disagreement of substance on the one about freedom of information, so I shall come to that. Yet people would feel short-changed if we did not set out, on the record, a little response to the desire for our thinking to be teased out. So, I will go through the amendments as requested.
 First, when the delivery authority takes on its next incarnation—if Parliament is willing to give us another Bill next year—then it will, we hope, move from being an advisory body to a genuine delivery authority. At that stage it will be important for this House to make it clear that the delivery authority should have genuine independence—both on investments and operationally—and the ability to recruit the skills that it needs. Personally, I think that an important point within that will be for us to establish clearly that it should make investment decisions on behalf of its members and with their interests at heart, rather than under political direction. That will be an important precedent to set.
However, that is not the delivery authority that we are discussing today. As I said earlier, the one under discussion is one that is advising the Secretary of State on the proposals that he will be making. So, the bedrock of parliamentary accountability here—and the answer to the questions set out by the hon. Member for Eastbourne at the start of his speech—is that it will not be going off to make a whole bunch of decisions for which Parliament cannot hold it to account. It will be advising the Secretary of State, whom Parliament can hold accountable during this period of its operation in exactly the normal way.
On the detail of process in the amendments, I also want to echo what has been said about Which? and the important role that it has played throughout the process of developing these policies, while representing in particular the interests of consumers and members. Which? has much influenced our proposals, and all parties have welcomed that. Its central point—that members and consumers should be absolutely at the heart of personal accounts—is right, and we indeed intend to reflect that in our proposals following the White Paper that we published in December.
 An open question in the White Paper asks people to come forward with suggestions on how members should be represented, involved and consulted. We have a genuinely clear and open mind on that area, and are keen to have suggestions; we look forward to what the Work and Pensions Committee says on that as well. In making personal accounts work, it will be important both that the criterion for the authority’s decision making is clearly established to be the interests of its members—as it is their pensions that we are talking about—and that the members themselves feel confident that they have appropriate representation and influence over the decisions being made on their behalf.
We will be discussing those items in the light of the response that we get to our consultation, which bore in mind the work of the Work and Pensions Committee. We will publish our response to that Committee, which hon. Members will have a chance to scrutinise over the next few months. Those are the general issues that we will be able to discuss, but the amendments that we are talking about today—to which I now want to turn—are much more specific.
Clause 18 establishes a Personal Accounts Delivery Authority, which we want to give independent advice to Government while using the professional expertise and knowledge that exist in the private sector. The establishment of such an authority has generally been welcomed by stakeholders, both those in financial services and representatives of consumers and trade unions. I am pleased to see that the Opposition parties also support the principle of having a delivery authority.
Schedule 6 covers the membership, proceedings and organisational parameters within which the delivery authority must operate. We envisage the authority operating on the basis of a small board, with executive and non-executive members, supported by staff and specialist committees. Initially, under the provisions set out in the Bill, the delivery authority will provide advice, supporting the Government in understanding the operational and commercial implications of policy options. It will also advise on the design of the commercial strategy, including the financial, technical and commercial analysis needed for policy development. That is the general approach. I will now turn to specific amendments.
On Crown immunity, I understand that the intention of the hon. Member for Eastbourne is not to give the organisation Crown immunity, but to test whether we believe that it should be subject to judicial procedures in the normal way, as any organisation advising on policy in this way should be. That is our intention. If he wanted to press his amendment, we would resist, but I hope that gives him the comfort that he wants. If people feel that they need judicial recourse against the authority, they will be able to resort to it in the normal way.

Nigel Waterson: I do not want to labour the point, but it seems odd to envisage legal claims against the delivery authority rather than the board in due course. I wonder what kind of claims the Minister envisages being made. Is any provision made for possible claims in the amount set out in the regulatory impact assessment, which is £21 million for the delivery authority up to the second Bill being dealt with by Parliament?

James Purnell: If people wanted judicial recourse against the authority, they would sue the Secretary of State in the normal way. They would have judicial review of the Secretary of State. I hope that that gives the hon. Gentleman the assurance that he wants. If there was a feeling that the authority had acted in a way that needed judicial review, that would be possible.

Nigel Waterson: So, I assume that in due course the board would have a different set-up? That body, once it is up and running, is envisaged as the one to be sued, rather than the Secretary of State.

James Purnell: That is absolutely right. In the authority’s next incarnation, when not giving advice but actually making proposals, then it would obviously be subject to normal judicial review and other legal proceedings.
On freedom of information, I am just not sure that I agree with the hon. Gentleman. I can see the desire for transparency. However, in the same way as civil servants give advice to Ministers, which they would sometimes not be comfortable having in the public domain, so is the role of the delivery authority in giving advice to the Secretary of State, where the analogy would apply as well.
There are some side effects of his amendment that I think the hon. Gentleman would not want, such as anybody applying for an interview being able to ask for the questions that they were going to be asked in advance, or so I am told. Apparently anyone wanting to get into the authority’s IT system could ask for the passwords. I know that that is not the amendment’s intention. On the basis of wanting effective policy-making at this stage it would be better for the Freedom of Information Act to apply to Departments, as it does now. That is why we will resist the amendment if the hon. Gentleman divides the Committee on the proposal. We do not propose to exempt the authority from protection for policy and advice because it would not be conducive to their giving frank and impartial guidance, which is exactly why Parliament put those provisions into the Freedom of Information Act in the first place.
 On amendments Nos. 12 and 13, I reassure the hon. Gentleman and the hon. Member for Yeovil that as with all other public bodies, when appointing non-executives we are required to follow the code of practice of the Office of the Commissioner for Public Appointments for ministerial appointments to public bodies, which is a guide to the steps that must be followed to ensure a fair, open and transparent appointments process. Independent scrutiny is a mandatory element of the process and no appointment may be made unless an independent assessor has been involved. In appointing initial executive members we will follow an open and transparent process that follows best practice and standard employment procedures.
The hon. Member for Eastbourne wanted to know whether we had started recruiting. I can tell him that we engaged headhunters on Monday and we plan to start the recruitment process in February. If he knows of anyone who may want to apply, he can refer them to a firm called Egon Zehnder. I hope that that gives the hon. Gentleman the information that he wanted.

Nigel Waterson: As soon as we adjourn today I shall be polishing my CV.
Two questions arise from what the Minister said: first, will he share with the Committee the job descriptions of the positions of chairman and chief executive that he has given to Egon Zehnder, a reputable and well-known firm in the field? Secondly, what is the Cabinet Office or other rule about recruiting people and spending money when the Bill has barely scratched the surface of its parliamentary process? These people do not work for charitable purposes.

James Purnell: I think the rule is that the process can start after Second Reading. We will be careful to follow the application procedure in keeping with Cabinet Office and Treasury guidance on the spending of public money under this Bill.
The hon. Gentleman asked whether we would want specific marketing expertise and we are happy to discuss that with him and with stakeholders.

Nigel Waterson: I hope that the Minister has not forgotten my first point.

James Purnell: I probably have. [Interruption.] We are happy to share that with the hon. Gentleman. We want to discuss it with our headhunters first, as their expertise is in formulating all that. If the hon. Gentleman wants to make any suggestions we will be happy to consider them and we will happily commit to sharing the job description with him. The process can begin after Second Reading but the appointment will be after Royal Assent.
We did not envisage requiring marketing expertise to be specified in legislation. It will be for the chairman and the chief executive to decide the expertise that they want on that issue. However, we do not want to put that in the Bill, as we want a nimble organisation that can be flexible in deciding whom it recruits.
As I was saying, independent scrutiny will be a mandatory element in the process and no appointment will be made without an independent assessor. We recognise the importance of ensuring that the board contains individuals with a breadth of knowledge and experience from a range of backgrounds. At the initial stage of delivery, it will be small, so it will be particularly important to ensure that we have the right skills and expertise in place.
Amendments Nos. 8, 9, 10, 11, 41, 42, 44, 14 and 45 relate to the important issue of consumer representation. The principle that consumer involvement and expertise is vital to the work of the delivery authority is recognised by all parties. However, at this stage I am wary of starting to mandate individuals on boards to represent individual stakeholder groups. We might end up with stakeholders in the financial services industry, stakeholders among employers providing schemes and stakeholders in trade unions, and we would be in danger of creating the sense that certain people on the board had responsibility for one particular section or interest rather than for the effectiveness of personal accounts as a whole. Like the BBC and Ofcom, which do not have people representing specific interests, we want the board as a whole to be responsible for the whole success of personal accounts. That means representing consumers and performing the other duties that, initially, the personal accounts board and the delivery authority will have.
While supporting the principle that consumers and people with expertise in consumer issues should have appropriate involvement in personal accounts, we are reluctant to legislate specifically for that.

David Laws: Has the Minister had a chance to meet the most prominent consumer organisations to think about how he might satisfy their concerns within the context of those reservations? Would he be willing to do so if they wished to take him up on it before the measure is taken further?

James Purnell: We met with them a number of times in the run-up to publication of the White Paper, and will be happy to do so again. In fact, we had one running meeting—the Division bell rang half way through and we continued it while running to the Division Lobby. The issue is not new, and the views of those people shaped the section of the White Paper covering consumer representation. We are happy to listen to any specific proposal. However, we do not think that we should necessarily legislate for the detail. We will continue to discuss the issue; indeed, my officials are in regular discussion with the stakeholders who have been mentioned and others, as well as through our much-referred-to series of seminars
 As for the calls for a lay chair, all members of the delivery authority board will be expected to act in the interests of all prospective scheme members in performing their roles. That duty will apply to everyone. Given that we are trying to create an organisation with a relatively small board, we do not want to specify backgrounds that would not be suitable for particular jobs. We recognise that those interests will have to be taken into account, and that people with expertise in those issues will have to be involved in personal accounts, but we may come to regret disqualifying anybody with a financial services background from chairing the authority if the best person to do so happens to have that background. In that, we disagree with the thrust of the amendment. We want the delivery authority to have the flexibility to recruit the best people for the job, and we do not want to tie their hands. With that, I shall move on from consumer representation, unless hon. Members have any burning issues to raise.
Amendment No.15 relates to conflict of interest. There is nothing hugely mysterious about it. Most conflicts of interest would be financial, but it possible to envisage a conflict of interest that was not directly financial. For example, a member of someone’s family might run a company that could be affected by the introduction of personal accounts, or there might be other non-financial conflicts of interest. The only reason for having the words “and other interests” is to give the Secretary of State the flexibility to deal with any potential non-financial conflicts, having regard to legal advice as necessary.
 As for amendment No. 82, again there is no great mystery here. We are replicating the financial remuneration framework that applies to non-departmental public bodies, which gives the Secretary of State, should he so determine, the flexibility to pay or make provision for payment of pensions, allowances or gratuities to non-executive members or their dependants, survivors, spouses or children. There is nothing new about that; that is how we remunerate people generally, and we will consider the exact remuneration package at a later stage.
I hope that I have given the hon. Member for Eastbourne the information that he wanted, and that I have dealt with all the amendments that we are discussing with the clause. I thank hon. Members for tabling the amendments; it is important that we have had a chance to discuss them, and I hope that we have been able to allay any concerns. As I say, we support the general thrust behind most of the amendments. We want hon. Members involved at the very heart of personal accounts; their support and confidence in the organisation will be central to making it a success. They have asked genuinely open-minded questions about how that should be done in the next phase of personal accounts. In this phase there will be a nimble, small body that gives us advice based on the best financial, consumer and other expertise. I urge hon. Members to withdraw their amendments.

Nigel Waterson: I am grateful to the Minister for going through all the amendments in such detail. Let me try to pick up some of those points as briefly as I am able, given the size of the group of amendments—the largest group that the Committee has considered so far.
I am grateful for the clarification on Crown immunity. I was genuinely puzzled by that, and I am now clear that the legal situation in terms of the claims of the delivery authority will be quite different from that of the board in due course. It is important that there is in due course a separation between the body that is delivering personal accounts in the long term and the Government of the day.
 I am disappointed by the Minister’s reaction on freedom of information. I suppose that all Ministers develop in that way eventually, and it is rather upsetting to see this Minister, who is so young, succumbing to what the right hon. Member for Manchester, Gorton (Sir Gerald Kaufman) calls “ministeritis” in his excellent book, “How to be a Minister”, the third edition of which has just come out and which I commend to the Minister. Again, this is not just some mad Tory obsession, or even a mad Liberal Democrat obsession. It is a point initially raised by the Association of British Insurers, which has a legitimate interest on behalf of its many members. In a way, it suggests to me that the Government are now stepping back.
We have all immensely enjoyed the succession of seminars, where there has been cross-fertilisation between Ministers, officials, the industry and others. It seems as if we are now going to take a step backwards. Given that the body will be primarily delivering advice to Ministers about the future shape of personal accounts, I cannot believe that it can claim a monopoly of wisdom, expertise and experience in those matters. I think that it is important that bodies such as the ABI and its members, and many others such as Which? or any body with an interest, should have access to the documents. As for the ludicrous examples given—with due respect to the Minister—I do not know whether he has ever tried to make a freedom of information application under this Government, but the notion that someone going for an interview could get the questions in advance by putting in a freedom of information application is just risible. I forget what the other example was.

John Penrose: IT passwords.

Nigel Waterson: Yes, gaining access to the IT system. I am sure that some exclusion can be crafted to put the Minister at ease on that. All that we are talking about is people with a legitimate interest and genuine expertise and knowledge of these matters having access to the advice tendered to Ministers. My intention—I am not quite sure where it comes in our deliberations, Mr. Gale—is to press new clause 5 to a vote. I urge Opposition Members to join me on that.

James Purnell: I give the hon. Gentleman an assurance that we want the authority to be open and consultative in everything that it does. There may well be occasions when it wants to give advice in confidence. I am sure that he can imagine circumstances in which it would want to do that. That is why we think that freedom of information should apply to this body in the same way that it applies to other Government bodies.

Nigel Waterson: I see that. I do not suggest that this is the beginning of some slippery slope to a police state, any more than we have one at the moment but without the police, but there is a genuine issue here. I hope that whoever runs this body will have the good sense to meet regularly with us. If consensus is to mean anything, it needs to be a continuing process. I regard the position on freedom of information as being counter consensual in that sense.
I hope that we can get round that by having regular meetings with this bod or bods who will tell us their troubles. We do not want to sweep into office in two or three years’ time to find that they have been advising Ministers that this whole thing is doomed to fail miserably. We will keep coming to the seminars, because we are sad people with nothing else to do, but also because they can be quite interesting. But I urge the Minister to reconsider that point.
I am grateful for the Minister’s openness on the appointment procedures. I am delighted to hear that he has Egon Zehnder on the case. I shall be interested to see what comes from his discussions with that firm. I assume that the usual rules about political affiliation will be observed. I was grateful for his confirmation that the appointment can be made only after Royal Assent. I suppose that any money can be spent only then too. I hope that Egon Zehnder is aware of that.
There is a serious point about marketing experience. David Norgrove or Laurence Churchill are both excellent and incredibly able and competent men, but a different animal is needed here. I am not suggesting PY Gerbeau, but we are looking for someone with a bit of pizzazz and salesmanship and a marketing strength which is not required in something like the Pension Protection Fund, which in effect has a captive audience. That is the point that I was trying to make, if I can put it in a nutshell.
 I think that I am happy with the Minister’s assurances about consumer representation. He clearly stated that the Government were also grateful for the input from Which? and others. As I said in my opening remarks, I can understand the argument that we should not necessarily state in the Bill precisely who should be taken on. The Minister reassured me enough that I shall not press the amendments. I accept that the wealth and variety of experience referred to in the amendments, as well as consumers’ views, will be taken into account. That is a win for our point of view.
I mentioned earlier the £21 million which, according to the RIA, has been budgeted for the delivery authority between now and the next Bill. I should have done so earlier, but let me say that I shall be immensely grateful if the Minister will write to us with a breakdown of how that figure was reached.
I was satisfied by what the Minister had to say on conflict of interest—he confirmed what he had had in mind. However, as he says, the great bulk of such potential cases would be based on a financial conflict of interest.
I am happy not to pursue any of the amendments tabled in my name; of course, I cannot speak for the Liberal Democrats. However, I would like to vote at the appropriate moment on new clause 5.
I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 18 ordered to stand part of the Bill.

Roger Gale: We have had the substantive debate on the principle behind schedule 6, but we are yet to debate two groups of amendments to it.
 Further consideration adjourned.—[Mr. Heppell.]

Adjourned accordingly at sixteen minutes past Three o’clock till Tuesday 6 February at half-past Ten o’clock.